Mason Corporation began operations at the beginning of the current year. One of the companys products, a
Question:
Mason Corporation began operations at the beginning of the current year. One of the company’s products, a refrigeration element, sells for $185 per unit. Information related to the current year’s activities follows.
Variable costs per unit:
Direct material .....................................$ 20
Direct labor ............................................ 37
Manufacturing overhead ..................... 48
Annual fixed costs:
Manufacturing overhead .......... $600,000
Selling arid administrative .......... 860,000
Production and Sales activity:
Production (units) ........................... 24,000
Sales (units) ...................................... 20,000
Mason carries its finished-goods inventory at the average unit cost of production and is subject to a 30% income tax rate. There was no work in process at year-end.
Required:
1. Determine the cost of the December 31 finished-goods inventory.
2. Compute Mason’s net income for the current year ended December 31.
3. If next year’s production decreases to 23,000 units and general cost behavior patterns do not change, what is the likely effect on:
a. The direct-labor cost of $37 per unit? Why?
b. The fixed manufacturing overhead cost of $600,000? Why?
c. The fixed selling and administrative cost of $860,000? Why?
d. The average unit cost of production? Why?
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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